Morgan Guaranty Trust Co. of New York v. Huntington

• Decision Date: 16 March 1962
• Citation: 149 Conn. 331,179 A.2d 604
• Court: Connecticut Supreme Court
• Parties: MORGAN GUARANTY TRUST COMPANY OF NEW YORK et al., Executors and Trustees (ESTATE of Archer M. HUNTINGTON) v. Anna H. HUNTINGTON et al. Supreme Court of Errors of Connecticut

Page 604

179 A.2d 604

149 Conn. 331

MORGAN GUARANTY TRUST COMPANY OF NEW YORK et al., Executors and Trustees (ESTATE of Archer M. HUNTINGTON) v. Anna H. HUNTINGTON et al.

Supreme Court of Errors of Connecticut.

March 16, 1962.

Wendell Davis, Danbury, with whom were Edward J. Butler and Thomas L. Cheney, Danbury, for plaintiffs.

David Goldstein, Bridgeport, with whom were Irving J. Alter, Bridgeport, and, on the brief, Robert Fain, Bridgeport, for defendants Anna H. Huntington and others, Trustees of the Hispanic Society of America.

John W. Barnett, New Haven, for defendants City Trust Company and others; with him were Howard J. Maxwell and W. Harmon Leete, Hartford, for defendant State-Planters Bank of Commerce and Trusts, and Henry S. Robinson, Jr., Hartford, for defendants Hartford National Bank and Trust Co. and others.

A. Searle Pinney, Danbury, with whom, on the brief, was Burton F. Sherwood, Danbury, guardian ad litem, for defendants John B. Warnken and others.

Norman K. Parsells, Bridgeport, with whom was Peter Wilkinson, Bridgeport, for defendants National Academy of Design and others.

G. Campbell Becket, Lakeville, for named defendant.

Before KING, MURPHY, SHEA and ALCORN, JJ., and HOUSE, Superior Court judge.

KING, Justice.

Basically, this is an action for the construction of the will of Archer M. Huntington of Redding, Connecticut, who died December 11, 1955. The plaintiffs are the executors and trustees under the will, which was dated February 24, 1941, and admitted to probate in Redding on December 20, 1955. Certain questions propounded in the action have been reserved for determination by us. The testator left no issue, but his widow, Anna Hyatt Huntington, one of the defendants herein, survived. She is a life beneficiary of the entire residue, which comprises a trust created under the seventh article of the will.

Certain property which formed no part of the estate passing under the will and is hereinafter referred to as nontestamentary property was required to be included in the estate for purposes of taxation under the laws relative to the Connecticut succession tax, the Connecticut estate tax, and the federal estate tax, commonly referred to, collectively, as death taxes. Rev. 1949, §§ 2021(d), 2065 (as amended, General Statutes, §§ 12-341[d], 12-391); Cum.Sup.1955, § 1138d (General Statutes, § 12-343); Int.Rev.Code of 1954, c. 11, §§ 2036-2041, 26 U.S.C.A. §§ 2036-2041. This nontestamentary property included twenty-two inter vivos trusts which the testator had established from time to time; certain miscellaneous items of property, such as annuity policies and jointly owned real estate, aggregating about $250,000; and the principal of two New York trusts, hereinafter referred to as the Hanover trusts, which were created by the mother of the testator and over which he had general testamentary powers of appointment.

The eighth article of the will reads as follows: 'I direct the payment by my executors from the capital of my residuary estate of any and all estate, transfer, succession or inheritance taxes which may be levied upon my estate or any part thereof.' Certain of the defendants claim that this provision suffices to require that the death taxes, amounting to about one and one-fifth million dollars, imposed with respect to the nontestamentary property should be paid from the capital of the residuary estate. The validity of this claim, with respect to the state and federal estate taxes, is governed by the provisions of the proration statute, § 1159d of the 1955 Cumulative Supplement (now General Statutes, § 12-401). The validity of the claim with respect to the Connecticut succession tax is governed by the provisions of § 2052 of the 1949 Revision (now General Statutes, § 12-376). Riggs v. Del Drago, 317 U.S. 95, 97, 63 S.Ct. 109, 87 L.Ed. 106. The operative effect, in this respect, of both statutes is substantially the same. McLaughlin v. Green, 136 Conn. 138, 141, 69 A.2d 289, 15 A.L.R.2d 1210. For convenience, they will be referred to as the proration statutes. Taken together, their effect is that, as to all death taxes, "[p]roration * * * is the rule, indeed, the mandate, to which exception is possible only if the testator clearly indicates' that there is to be no proration.' Guaranty Trust Co. v. New York City Cancer Committee, 145 Conn. 542, 548, 144 A.2d 535, 538.

The reference in the eighth article of the will to death taxes 'upon my estate or any part thereof' falls short of being a clear direction that the proration statutes should not apply to the death taxes attributable to the nontestamentary property. Consequently, the proration statutes are applicable, and the ultimate burden of all death taxes attributable to the nontestamentary property should fall on the recipients of that property and not on the estate. McLaughlin v. Green, supra, 136 Conn. 144, 69 A.2d 289. It follows that question (a) should be answered 'Yes.'

The federal estate tax imposed on a decedent's estate must be paid by the executor. Int.Rev.Code of 1954, c. 11, § 2002, 26 U.S.C.A. § 2002. The statute, by its terms, entitles him to recover from beneficiaries of life insurance policies and recipients of property under powers of appointment their proportionate share of the federal estate tax paid on a gross estate which included the insurance proceeds and the property appointed. Id., §§ 2206, 2207. The apportionment of federal estate taxes with respect to other inter vivos transactions which are required to be included in the decedent's gross estate for federal estate tax purposes is left to state law. Riggs v. Del Drago, supra. Where that law requires apportionment, the executor is entitled to recover from a beneficiary of an inter vivos transaction his proportionate share of the death taxes, state or federal. Bragdon v. Worthley, 155 Me. 284, 299, 153 A.2d 627; Gaede v. Carroll, 114 N.J.Eq. 524, 533, 169 A. 172. The executors here should take appropriate steps to recover from the recipients of the nontestamentary property included in the testator's gross estate for state or federal death tax purposes their proportionate shares of all death taxes which the executors have been compelled to pay. Consequently, question (b) should be answered 'Yes.'

Certain of the defendants claim that, in any event the eighth article of the will is sufficient to prevent the proration statutes from applying to the residuary provisions of the will. The eighth article is not inoperative. It is effective to provide for the payment, from the residue, of death taxes chargeable to the nonresiduary dispositions in the earlier articles of the will insofar as these dispositions are taxable. That the amount of such taxes was relatively small does not render the eighth article useless. The testator's instruction that the taxes should be paid 'from the capital of my residuary estate' cannot be considered as a clear directive against the prorating of the taxes in question among the residuary gifts. New York Trust Co. v. Doubleday, 144 Conn. 134, 142, 128 A.2d 192. Proration under the statutes is ordinarily the fairer method. If a testator does not wish such proration, it is a simple matter for him to provide that the proration statutes shall not be applicable, either to the entire property subject to tax or to certain clearly designated portions of it. No such clear language was used here, and it follows that the proration statutes are applicable to the gifts within the residuary clause. Question (c) should be answered 'No.'

The method of proration as to the residuary clause, including the proper treatment and application of any marital or charitable deduction, is prescribed by statute and more fully explained in Guaranty Trust Co. v. New York City Cancer Committee, 145 Conn. 542, 549, 144 A.2d 535. Question (d) should be answered 'Yes.'

Certain of the defendants make what amounts to a collateral attack on a portion of a New York judgment determining the effectiveness of the testator's exercise, in his will, of testamentary powers of appointment conferred on him by the instruments creating the Hanover trusts. These trusts were created during the years 1897 to 1901 by Arabella D. Huntington, the testator's mother, by agreements with a predecessor of the Hanover Bank. The agreements provided that the trust income be paid to the testator during his life and, on his death, the principal be paid and delivered to such persons or parties as he should by his last will and testament direct. In other words, general testamentary powers of appointment were conferred on the testator. The agreements were made in New York, and the trusts were administered in that state and under its laws by a New York trustee, now the Hanover Bank. The domicil of Arabella D. Huntington at the date of the creation of the trusts does not appear.

Article seventh of the will creates a trust of the entire residue, which constitutes the bulk of the testamentary estate. The entire trust income is to be paid to the widow during her lifetime; at her death, the trust corpus is ordered divided into eight equal parts. The provisions for but one of these, the eighth, need be outlined. It is ordered subdivided into three shares: one share for the issue, collectively, of the testator's maternal aunt, Emma Warnken; a second share for the issue, collectively, of John D. Yarrington; and the third share for the issue, collectively, of Richard M. Yarrington. In each instance the 'issue' is limited to those born during the testator's lifetime and living at his widow's death. Each share is ordered further subdivided, per capita, and each subdivided share is ordered held in trust for the qualifying beneficiary, the income from it to be paid him for life. After the death of any such beneficiary, the income from his per capita share is to be paid, in perpetuity, to the trustees of the Hispanic Society of America, hereinafter referred to as Hispanic, who ultimately will...